(UPDATED) As the mobile point-of-sale battle continues to heat up, VeriFone CEO Doug Bergeron issued an open letter to Square today claiming Square’s hardware “is poorly constructed and lacks all ability to encrypt consumers’ data.” In the letter, and through a video posted to YouTube, Bergeron calls on Square to recall its credit card readers from the market immediately.

In the video, Bergeron discusses the ease with which criminals can create Square accounts and use the Square dongle, a small adaptor that serves as a credit card reader attached to merchants’ iPhones, and fake iPhone application to skim unsuspecting credit card information of unsuspecting consumers for later fraudulent use.

Unlike many mobile POS applications, including VeriFone’s own competitive PAYware Mobile service, the Square credit card reader does not encrypt credit card data when it is swiped.

In the letter, Bergeron says there are "hundreds of thousands of these unsecure devices already floating out there." Bergeron also says Square "has lost complete control of the dongles they have deployed."

The video shows a fake application that Bergeron says was created by VeriFone in less than one hour. In the video, Bergeron says that VeriFone is giving copies of the application to Visa, MasterCard and JP Morgan Chase, Square’s credit card processing bank, for their review.

More to come as this story develops.

For context on the mobile POS market on MobilePaymentsToday.com, go to Mobile POS providers earn customers and merit badges. Additionally, a recent blog post about Square’s valuation and positive press coverage is here: A Square bubble? 

UPDATE: VeriFone's video was taken down on March 9 by YouTube for a terms-of-service violation. As soon as a new site is located, the link will be changed.